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Lic is hiding in the discount zone, but can investors expect the stock to cross the issue price soon?


Life Insurance Corporation (LIC) shares have yet to reach a secondary market premium, meaning the stock still has more ground to cover before breaking through the upper end of its price range. IPO on the secondary market.

The newly listed LIC share twirled in a Rs 95 range between Rs 825 and Rs 920 after a low quote amid a market-wide sell-off.

Over the past few years, India’s largest public offerings have largely debuted in the secondary market at less than the issue price.

With the exception of dry fuels giant Coal India and property developer DLF, all of the country’s biggest issues have started their journey on discount exchanges. And according to the current market price, all the big ones have not yet crossed their issue prices, which means they have not yet reached the premium zone.

Store Issue size (crore of rupees) End of trading day Issue price Trading day vs issue price (%) CMP vs issue price (%)
Life Insurance Company (LIC) 21,000 875.5 949 -7.8 -12.9
Payment 18,300 1,564.2 2,150 -27.2 -73.2
Coal India 15,475 342.4 245 39.7 -24.1
power of trust 11,700 372.5 450 -17.2 -97.1
General Insurance Company (CPG) 11,373 870.4 912 -4.6 -87.5
SBI Cards 10,350 683.2 755 -9.5 -1.8
New India Insurance 9,600 725.1 800 -9.4 -87
LDF 9,187 570.1 550 3.6 -39.7

Can you expect LIC shares to cross their issue price soon?

Yash Gupta, equity research analyst at Angel One, told CNBCTV18 that LIC, in his view, will take big positive triggers for his stock to break through the IPO price. Until then, investors can expect range moves in the stock and those with a long view can even consider buying at current levels, he said.

Category Subscription (Number of times shares reserved)
QIB 2.8
TIN 2.9
Retail 2
Employee 4.4
Insured 6.1

LIC’s initial public offering (IPO) saw an aggregate subscription of three times the shares offered, with strong interest from retail investors, including employees and policyholders.

“When the stock price attempts to rise from discount levels, prior investors may choose to sell and incur small losses, which could prevent the stock price from turning into a premium,” Deepak Jasani, head of retail research at HDFC Securities, told CNBCTV18. com.

“In the event that the IPO valuation appears to be on the rise, particularly after earnings or other developments, new purchases will be limited, even at a discount to the IPO price. If the QIB portion (including the anchor portion) was originally well subscribed, the urge to increase their holdings or further purchases from new institutions might be limited unless there are genuine signs of financial recovery. are not visible,” he said.

So what might be the possible triggers for the state-run insurance major?

Life insurance companies derive their revenue from two sources: the premium — which depends on the provisions for risks to be constituted — and on the income from the float — which depends on interest rates and the stock market.

“The medium-term earnings driver for LIC is free-float income, particularly for the amount invested in fixed-income securities. With interest rates firming, the public sector insurer could be among the largest sector beneficiaries,” said Tanushree Banerjee-Co. -Head of research at Equitymaster, told CNBCTV18.com.

She added, however, that the insurer will continue to compete with its private sector peers in terms of insurance product innovation and collection efficiency, even in the long term.

“This had to build a huge provision during the COVID quarters, some of which was reversed in subsequent quarters and contributed to its profitability,” Banerjee said.

Meanwhile, Macquarie has assigned a target price of Rs 1,000 to the LIC share, representing a 17.4% premium to its issue price at Friday’s closing price.

According to Motilal Oswal Financial Services, LIC, with its dominant position, is well placed to conquer the highly underpenetrated life insurance industry in India. The brokerage believes that LIC’s valuation is significantly lower than that of its private sector listed counterparts.

First post: STI

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